Ann: Update on divestment of East Coast Rail, page-11

So lets kick around what a demerger might look like.
ECR earns $140M....lets give it a P/E of 12x....so cap of $1,680M
Every AZJ share gets one ECR share .... so.... 1,841M shares
Gives us a listed price of $0.91.
EPS = $0.076
DIV = $0.053 (70% payout ratio)
YIELD = 5.8%

The problem is going to be where AZJ lands.
It will have taken on $1,930M debt for a boost in earnings of $80M...not great!
They will need to reduce this ASAP....so.....a longer term reduction in dividend payout would be on the cards.
The good news is that with covid, incessant rains and china coal bans moving into the rear view mirror we should be back on track for $700M earnings....allowing for a decreased payout ratio...BUT....a maintained dollar value of divided.

Overall I think the demerger option is a giant positive.
1. We get ownership of a tasty little company on the cheap
2. AZJ has bitten off a little too much but it has the capacity to digest it.
3. Decrease the ESG issues of AZJ
4. If we maintain AZJ div @ $0.306 and add ECR div @ $0.053.....we get $0.359 dividend (all include franking credits)

Thoughts??